Home prices to fall 15%? Try 30%... or 43%
Happy new year, and welcome to the week when every purported expert on every subject under the sun trots out his prognostications for the coming year.
Today's New York Times tackles the prospects for recession and finds the following consensus on the glut of unsold housing:
This assemblage of unsold properties will not be whittled down to
normal levels, economists suggest, until national home prices fall by
at least 15 percent from their peak, reached in the summer of 2006. So
far, prices have dropped a little more than 5 percent, according to the
Standard & Poor’s Case-Shiller home price index.
Not so fast , says the left-leaning but often-insightful Dean Baker, in his modestly self-referential "some economists" style:
Some economists who were not surprised by the downturn in the housing market have pointed out
that house prices will have to fall by more than 30 percent after
adjusting for inflation to get back to their longterm trend path. This argument should have been included in this discussion.
Indeed, another calculation finds the possibility your home's price could fall 43% by 2011. To see who came up with it, and how the figure is so precise, check out this report .